Unibet Group plc The Plaza Complex Level 5
Bisazza Street, Sliema SLM15, Malta Tel: +356 2133 3532
Fax: +356 2343 1510 Registered offi ce:
c/o Camilleri Preziosi, Level 2, Valletta Buildings, South Street, Valletta, Malta.
Company No: C 39017.
Registered in Malta.
WWW.UNIBETGROUPPLC.COM
Unibet Group plc
ANNUAL REPORT 2007
21.4
EBIT GBPM 18.7Profi t after tax GBP M
Key objectives
Satisfi ed and excited customers Motivated employees
Strong fi nancials.
Unibet’s strength
One of Europe’s largest gaming companies in a fast-growing and exciting consumer category Diversifi ed product and geographic portfolio Organic growth main focus combined with
selected acquisitions
Legal tension creates opportunities.
VISION
Unibet is a leading player in the European moneytainment market and the thrill of putting money at stake in order to win more is at the heart of Unibet’s vision.
MISSION
The business concept is to provide reliable online gambling and build value by delivering entertaining products and excellent service.
MONEYTAINMENT FOR EVERYONE, ANYTIME, ANYWHERE.”
ANNUAL GENERAL MEETING ANNUAL GENERAL MEETING
The Annual General Meeting (AGM) of Unibet Group plc will be held at 16.00 C.E.T. on Tuesday 29 April 2008, at the Grand Hotel, Södra Blasieholmshamnen 8, Stockholm.
Right to participate
Holders of Swedish Depositary Receipts (‘SDRs’) who wish to attend the AGM must be registered at VPC AB on
Friday 18 April 2008 and notify Skandinaviska Enskilda Banken AB (publ) their intention to attend the AGM no later than 17.00 C.E.T. on Friday 24 April 2008, by fi lling in the enrolment form provided at www.unibetgroupplc.com/AGM, ‘Notifi cation to holders of Swedish Depository Receipts in Unibet Group plc’.
The form must be completed in full and delivered electronically.
Please note that conversions to and from SDRs and ordinary shares will not be permitted between 18 April and 29 April 2008.
Dividend
The Board of Directors proposes a dividend of GBP 0.50 per share/
SDR, which is approximately SEK 6.30 per share/SDR.
Financial information
Unibet Group plc’s fi nancial information is available in Swedish and English. Reports can be obtained from Unibet’s website, www.unibetgroupplc.com or ordered by email at info@unibet.com. Distribution will be via email.
Annual Reports can be ordered through the website, www.unibetgroupplc.com or ordered by email at info@unibet.com.
Unibet will publish fi nancial reports for the fi nancial year 2008 on the following dates:
• Interim Report January – March 2008, on 28 April 2008
• Interim Report January – June 2008, on 30 July 2008
• Interim Report January – September 2008, on 29 October 2008.
Cert no. SGS-COC-O620 Designed and produced by Addison Corporate Marketing Ltd
Printed by Beacon Press Horseracing pictures by Stall Tz.se
The Company’s registered office is at The Company’s registered office is at
Camilleri Preziosi, Level 2 Valletta Buildings, South Street, Valletta, Malta Camilleri Preziosi, Level 2 Valletta Buildings, South Street, Valletta, Malta The Company’s registered number is C39017.
The Company’s registered number is C39017.
This document is the English original. In the event of any discrepancy between the original English This document is the English original. In the event of any discrepancy between the original English document and the Swedish translation, the English original shall prevail.
document and the Swedish translation, the English original shall prevail.
0.665
Earnings per share GBP0.50
Proposed dividend GBPUnibet in brief . . . 01
Highlights 2007. . . 02
New platform and website . . . 03
CEO’s statement . . . 04
Financial objectives . . . 06
Products . . . .08
Sports betting . . . 08
Non-sports betting . . . .11
Market overview . . . .12
Unibet’s markets . . . .14
Unibet going forward . . . .16
Shares and share capital . . . .18
Dedicated people . . . 20
Responsible operations . . . 21
Risk management . . . 22
General legal environment . . . 24
Directors’ report . . . 26
Remuneration Committee report . . . 28
Corporate governance statement . . . 30
Business performance review . . . 33
Consolidated income statement . . . 35
Consolidated balance sheet . . . 36
Consolidated statement of changes in equity. . . 37
Consolidated cash fl ow statement . . . 38
Notes to the consolidated fi nancial statements . . . 39
Independent auditors’ report . . . 57
Options . . . 58
Defi nitions . . . 59
Board of Directors and CEO . . . 60
Annual General Meeting . . . 61
Unibet was founded in 1997 and is one of Europe’s largest online gaming operators, with over 2.3 million registered customers in more than 100 countries
Unibet offers a full range of gaming products – such as sports betting, live betting, casino, poker, lotteries, bingo and soft games – through its primary website, www.unibet.com, and via mobile phone
In 2007, Unibet’s customers placed almost 45 million bets in the sports book. The most popular event, with nearly 100,000 bets, was the Champions League fi nal between AC Milan and Liverpool in May 2007 Unibet’s gaming business is conducted under licences in the United
Kingdom, Malta and Italy. Unibet Group plc is a company incorporated in Malta and has been listed on the OMX Nordic Exchange in Stockholm since 2004
Unibet is certifi ed by G4, Global Gaming Guidance Group, complying with their Code of Practice in relation to responsible gambling
Unibet is a member of the European Gaming and Betting Association, EGBA and the Remote Gambling Association, RGA
Today, Unibet has 358 employees representing 34 different nationalities.
UNIBET IN BRIEF
UNIBET IN BRIEF
FINANCIAL
81.4
Gross winnings GBPM
OPERATIONAL
HIGHLIGHTS 2007 HIGHLIGHTS 2007
25.9
EBITDA GBPM
2007
2006.
(restated) Gross winnings revenue – sports betting GBPm 26.6 23.2 Gross winnings revenue – non-sports betting GBPm 54.8 48.6
Gross winnings revenue GBPm 81.4 71.8
EBITDA GBPm 25.9 31.7
EBITDA margin % 31.8 44.2
Return on average equity % 22.7 37.0
Profit after tax GBPm 18.7 37.9
Profit margin % 23.0 52.8
Earnings per share GBP 0.665 1.344
Equity:assets ratio % 45 71
Net cash per share GBP 1.047 0.458
Net cash less bond per share GBP -1.484 0.458
Number of employees at year end 358 270
Registered customers at year end 2,348,900 1,580,000 Active customers last three months of the year 309,431 218,770
Number of shares at year end 28,241,092 28,241,092
Top of the league in online betting in the Nordic and Western European Regions
A bigger presence than ever in Europe with a newly regionalised organisation to grow even faster
A leader in the battle against state-owned monopolies Acquired Maria Holdings to strengthen position in Bingo
and Nordic markets.
LOOK HIGH, LOOK LOW, AND SEE THAT GAMBLERS ACTUALLY FORM THE MAJORITY OF THE WORLD’S INHABITANTS.”
James Runciman,
19th century English teacher, author and journalist.
USER EXPERIENCE TAKEN TO THE NEXT LEVEL
Developed together with customers, the new version of www.unibet.com combines a completely new design and lots of new and improved functionality to create the best user experience in the industry. Built on a new technical platform, the site features better stability and performance and decreases time to market. Crucially, the new site improves search engine friendliness and gives many more opportunities to attract new customers as well as to cross-sell and up-sell.
The user experience of the website is vital to attract and keep customers in this highly competitive online business. To achieve a great user experience Unibet involved customers and customer service agents to work with the product teams, designers and developers when creating the new Unibet website. This process took a little longer, but the result is much better.
By conducting focus groups and usability tests in Sweden, France, Spain and the United Kingdom on fi ve occasions, Unibet gained a deep understanding of which features are most
important for customers and how they would like to use a gaming website. For example, adding a ‘My Account’ box to the website and always having it visible has given customers easy access to transfer funds between different wallets, something that was much requested.
When creating the new live betting application, Unibet invited customers to a sports bar to watch them playing during a game. This gave deep insight and feedback which helped in making the fi nal tweaks before release and continuing the never-ending quest to provide the market’s best Livebetting offering. This sort of involvement from customers has been much appreciated and has given valuable input.
Unibet’s own customer service team, which is in daily contact with customers, has also given valuable insight and knowledge of what problems they run into and what type of questions are most frequently asked.
Valuable input from customers Working from customer comments and suggestions, the Unibet site has been redesigned to be even more fun and easy to use.
NEW PLATFORM AND WEBSITE
NEW PLATFORM AND WEBSITE
In March 2007, the European Commission (EC) issued a reasoned opinion against Finland, Denmark and Hungary and in June 2007 against France and Sweden. In February this year a reasoned opinion was issued against the Netherlands and Greece, regarding restrictions against online betting. This is the last step before taking both countries to the EU’s highest juridiciary authority.
Most recently, the EU Commission decided to send an additional letter of formal notices to Sweden and Germany. In these new cases the EC wishes to verify whether all national legislation restricting the supply of gambling are compatible with Article 49 of the EC Treaty, in Sweden’s case the restrictions relating to poker.
…but it also had its cost
As the history of the EU has shown, old monopolies tend not to relinquish their powers gracefully. Each tends to fi ght their corner when faced with the prospect of dynamic markets and open competition. Back in 1985, for example, the EU Commission brought the Italian government in front of the European Court of Justice to open up the communications market in line with European law, the so called ‘BT case’.
But to be on the frontline in the battle for online betting also has its cost. We had to terminate our cycling sponsorship as participation was denied in the major Pro-Tour races due to 19th century laws.
Unsatisfactory earnings
2007 was a cost year for the group. An increased cost of sales as a result of further usage of affi liate programs to drive higher customer growth and as a result we saw a strong customer intake, especially at the end of the year, with over 309,000 active customers. In order to strengthen our operations we have recruited more odds compliers, customer service agents and other key functions during this year.
My detention caused additional costs which on the other hand gave us a remarkable attention in the whole of Europe. In our tracking of ad awareness and considered brand we suddenly reached a new altitude.
We ended the year with a profi t from operations of GBP 21.4 million which is GBP 7 million below the previous year.
New digital engine
But there are also some highlights. One of these has been our emphasis on upgrading Unibet’s core Moneytainment products, by improving the user’s experience across the board. Key to those efforts has been the complete overhaul of our technical architecture in order to make our online offering modular rather than monolithic.
As a result, Unibet’s public face has become more appealing and more user-friendly, now providing customers with more exciting play.
Just as important to Unibet’s performance are its backroom benefi ts. By making these changes, our architecture and linked business confi guration now support the vision we formulated in 2005 and 2006. What we wanted then was greater business fl exibility and quicker responses to market dynamics.
New organisation
In August 2007, Unibet moved from being primarily a product-based business to one that will focus as well, on the four European regions in which we do the bulk of our business: the Nordic Region, Western Europe, Eastern Europe and Southern Europe. Each region will have its own team that works closely with the product teams to ensure that Unibet’s offering meets the needs and desires of our customers – wherever and whatever they may be playing. Each region will also have its own profi t and loss responsibility to maximise accountability, marketing effi ciency and cost control.
CEO’S STATEMENT CEO’S STATEMENT
THE LEGAL CLIMATE IS CHANGING…
The long-term market climate is in our favour – even if, as my
short spell in a Dutch prison cell in October last year suggests,
the current weather can be highly variable.
This shift has made us more ‘glocal,’ meaning that we’re able to achieve global economies of scale in the products we provide while successfully tailoring our offering to specifi c local and regional cultures and languages.
This new regional orientation has advanced Unibet as a commercial organisation.
Acquisition of Maria Holdings By the end of 2007, we were also a larger organisation, thanks to Unibet’s acquisition of Malta-based Maria Holdings, owner of several attractive online betting domains including Mariabingo.com.
Through this acquisition, we not only strengthened our position in the Nordic Region but also raised our profi le within the fast-growing online bingo market. In addition, greater strength in bingo will enable us to widen our appeal to women who have found the electronic versions of the game to be a reassuringly familiar way of orientating themselves to the online betting market. We’re convinced that in the next decade, female customers will become a real force in our industry. The Maria Holdings acquisition gives us a head start on this trend and a leading position in the Nordic online bingo market.
Opportunities for 2008
Increasing broadband penetration, the spread of e-banking and growing interest in televised sport are also working in the industry’s and in Unibet’s
favour. This year, the Olympic Games in Beijing and UEFA Euro 2008 in Austria and Switzerland will generate coverage and provide exciting Moneytainment opportunities.
The Maria Holdings integration is proceeding according to plan and the bingo and poker businesses continue on a strong growth path.
We are positive about the strength of the Maria Bingo business model and are in the process of introducing Maria Bingo in our European footprint.
We started 2008 with a signifi cantly upgraded website, which already shows proof of improved productivity and enhanced customer experience on a solid, scalable platform. We have a stronger structural capital and an extended product offering. Our focus now is to capitalise on this position and deliver strong cash fl ows while continuing growth. Our job is to keep all customers excited and engaged while attracting new customers to our sites, as well.
It’s a job all of us at Unibet love which is why the company’s motto is ‘by players, for players’.
Petter Nylander CEO
Malta, 28 March 2008
26.6
Sports book revenue GBPM
54.8
Other gaming revenue GBPM
AS THE HISTORY OF THE EU HAS SHOWN, OLD MONOPOLIES TEND NOT TO RELINQUISH THEIR POWERS GRACEFULLY.”
Petter Nylander, CEO Unibet
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Restated business objectives and new fi nancial goals
Unibet’s model has proved successful given the strong track-record in delivering profi table growth since its founding. The pillars of the model will continuously be a key for Unibet’s future success and are encapsulated in
‘The Unibet Way’:
• Leadership – Unibet aims for a top 3 position in every geographic market entered
• Brand – Unibet has a strong global brand supported by high-value niche brands for all markets and products
• Horizontal approach – Unibet has a horizontal business model, working with the best available suppliers for non-sports products, to enhance time to market, customer satisfaction and return on capital while managing the sports book internally using proprietary software, odds compilation and risk management
• Digital – Unibet is only focusing on digital distribution
• Responsible – Unibet works proactively to secure responsible gambling
• Talent – Unibet employs talented people, focuses on accountability and rewards high performers.
Unibet’s overall aim is to deliver the highest total return to shareholders (i.e., share price appreciation and dividend yield) in the industry.
As the Company sees ample opportunities to continue the growth path, primarily with focus on Europe and EU members-to-be, the Board in March 2007 decided on new fi nancial goals.
Achievable goals
By 2010 Unibet aims to increase gross winnings revenue from GBP 81.4 million in 2007 to GBP 175 million. The goal is for earnings before interest, taxes, depreciation and amortisation to almost double in that period and for Return on average equity (ROAE) to rise from the 23 per cent achieved in 2007 to 45 per cent by 2010.
In addition to these performance indicators, Unibet will, when needed for strategic acquisitions, seek innovative and attractive debt fi nancing in the market. The capital structure will be guided by keeping a fi nancing ratio of maximum 2 times EBITDA.
These goals will be made transparent to the market on an ongoing basis and are used internally to drive performance.
Three main drivers are propelling Unibet to achieving these goals: expanding demand for online gambling in European markets, top-line growth in those markets and improvements in the bottom line.
Europeans like to bet: the online market is already big, standing at EUR 4.3 billion.
According to the widely respected industry
FINANCIAL OBJECTIVES FINANCIAL OBJECTIVES
LOOKING TO 2010
The odds are in Unibet’s favour, with a more open market and top-line growth leading to even better bottom-line results.
New fi nancial goals
Performance indicators, GBP million Actual 2006 Actual 2007 Aspiration 2010
Gross winnings revenue 72 81 175
Maturing markets1 43 45 80
Growth markets2 29 36 95
EBITDA (margin) 32 (44%) 26 (32%) 61 (35%)
ROAE3 37% 23% >45%
1 Sweden, Denmark, Norway, Finland. 2 Rest of Europe. 3 Return (EBIT) on average equity (ROAE).
consultants, GBGC, by 2010 the market will have grown to EUR 7.1 billion. Unibet, with access to a potential 500 million people in the 27 Member States of the European Union (EU), is ideally positioned to benefi t from that growth.
As Unibet grows, the company will continue to pursue its rights to compete on equal terms with holdover state monopolies – the mere existence of which could be problematic under European law.
Unibet will also grow top-line growth by leveraging the company’s new online platform in all markets and extending live betting in sports. Innovative distribution models and compelling new retention schemes will also raise the company’s game.
New dividend policy
In March 2007 the Board decided to change the dividend policy and increase the payout of up to 75 per cent from previous circa 50 per cent of the Group’s net income after tax, provided other fi nancial objectives are met and an appropriate capital structure is maintained. This refl ects the Company’s trust in future ongoing strong cash- fl ow generation and aspiration to deliver outstanding total return to shareholders.
Sportsbetting Gross Win % (before and after free bets)
ANNUAL REPORT 2007
Acquisitions
In December 2007, Unibet acquired Maria Holdings to further strengthen its position in Bingo and the Nordic markets. The acquisition will give rise to a signifi cant potential within the female customer segment and create an excellent value opportunity in the fast-growing online bingo market.
To fi nance the acquisition, Unibet issued a bond totalling a nominal value of EUR 100 million.
The bond has a fi xed annual coupon of 9.70 per cent and matures after three years. The bond can be redeemed early at Unibet’s option from 21 December, 2008. The bond was registered on the OMX Nordic Exchange Stockholm AB’s Retail Bond List in February 2008.
In 2005 Unibet acquired MrBookmaker.com, one of the leading sports betting sites in France and the Benelux region. The acquisition strengthened Unibet’s position in France and the Benelux countries and gave the company direct access to an established marketing organisation and customer structure in these countries.
Share buy-back programme
At the 2007 Annual General Meeting (AGM), shareholders approved a share buy-back programme whereby the Board was authorised, until the next AGM in 2008, to acquire GBP 0.005 ordinary shares/SDRs in the Company.
The maximum number of shares/SDRs that may be so acquired is 2,824,109, i.e. may not exceed 10 per cent of the total number of shares issued by the Company.
The objective of the buy-back is to achieve added value for the Company’s shareholders and to give the Board increased fl exibility with the Company’s capital structure.
Following repurchase the intention of the Board would be to either cancel, use as consideration for an acquisition or issue to employees under a Share Option programme.
Once repurchased under the Maltese Companies Act further shareholder approval will be required before those shares could be cancelled.
If used as consideration for an acquisition the intention would be that they would be issued as shares/SDRs and not sold fi rst.
Acquisition strategy
The rationale behind Unibet’s acquisition strategy is to increase earnings and cash fl ow and thereby improve shareholder value. The overall acquisition strategy is focused on three areas: geographic expansion, product segment expansion and synergy realisation.
Unibet’s formula for a successful acquisition is to continue to achieve its own objectives in organic growth and meeting fi nancial goals while, at the same time, securing 100 per cent continuation of the target company’s ongoing business. It is key to securing the most talented individuals in the acquired company and to maintain their customer portfolio through a rapid realisation of synergies and an effi cient integration. With such high aspirations, linked to clear accountability, the fi rst 100 days are crucial in implementing a new organisational model and performance culture as well as realising the new one-year business plan.
Number of outstanding shares, 31 March 20071 28,241,092
Acquisition of own shares during Q2 -143,900
Acquisition of own shares during Q3 -154,000
No acquisition was made during Q4 –
Number of outstanding shares, 31 December 2007 27,943,192
Share buy-back
1 No share buy-back was made during the first quarter as shareholders approval was made at the AGM on 25 April 2007.
100
Countries2.3
Registered customers worldwideM
SPORTS BETTING
A heady combination of physical prowess, crowd excitement and patriotic impulses contributes to the appeal of sports betting.
It formed the basis of Unibet’s fi rst products over a decade ago.
Today, continuing innovation ensures that sports betting remains an important part of the earnings mix.
Unibet adds a Moneytainment dimension to a wide range of sports. These include football, tennis, ice hockey, trotting, basketball and handball. Opportunities to bet on major international sporting events, such as Euro 2008 or the Olympic Games help to attract newcomers to online betting in general and to Unibet in particular. But the Company doesn’t just rely on those headline fi xtures. Even more important in terms of turnover and earnings are regular fi xtures such as weekend football matches at national, local and youth levels.
Unibet is also expanding Moneytainment opportunities beyond sport. Events such as the Eurovision Song Contest, royal engagements and the results of popular television competitions such as Pop Idol have the added benefi t of also attracting more women to online betting.
What’s going to happen next? The urge to know that drives all sports fans. Unibet’s live betting facility harnesses that drive by offering customers a multiplicity of opportunities to bet online.
Depending on the sport, live betting options can include choices such as over/under number of goals, fi rst corner or number of serve aces in next game.
To expand those opportunities, in 2007 Unibet rebuilt its live betting interface to make play more attractive and user-friendly. Improvements also provided more chances to play – and substantial potential to boost turnover. In 2007 live betting accounted for over 20 per cent of sportsbook turnover. In 2008, that fi gure should increase substantially.
Supertoto
Supertoto gives an extra Moneytainment dimension to the weekend’s football results for thousands of customers. It allows them to predict the outcomes of 14 matches to win or share a substantial top prize. Payouts depend on the size of the pool and the number of correct predictions. As an online version of traditional football pools, Supertoto helps to draw new customers to Unibet. Current developments to the platform will expand the Supertoto product portfolio and attract a broader customer base in Europe.
Sports odds Live betting
PRODUCTS
PRODUCTS
Poker has become part of the 21st century’s zeitgeist. It’s a game that combines skill, stealth and subtlety. It’s also an integral part of Unibet’s product range, accounting for 22 per cent of the Company’s business.
Improvements in 2007 included upgrades to the poker lobby, friendlier software and a simplifi ed rake structure. The result of these developments: an enhanced online experience for players and increased revenue for Unibet.
Another change – switching to euros as the preferred currency – made Unibet Poker the biggest euro poker room in the world.
Brand promotion plays an important role in Unibet’s poker strategy and Unibet also runs its own television poker tournaments in Sweden and – new in 2007 – Finland. Other promotional activities extend to Belgium, Estonia, the Czech Republic and Spain. In 2007 Unibet sponsored the French Poker Tour, the biggest live free-roll tournament in France, with over 5,000 participants.
In the acquisition of Maria Holdings, Unibet also received Carlos Poker, one of the fastest-growing brands within the I-Poker network further diversifying Unibet’s portfolio.
Consisting of blackjack, roulette, slots and virtually every other form of betting available in any bricks-and-mortar location, casino games have been a Unibet mainstay since 2003. At any one time, over 50 games are available. New ones are joining the site at an average of one a month.
In 2007 Unibet’s casino games became even more appealing with better graphics, smoother play and faster load times. Such developments are vital to retain existing customers and to attract new players.
Unique to Unibet is the concept of casino tournaments, with prize pools of up to EUR 20,000.
Another world of Moneytainment opportunities for customers, non-sports betting in 2007 accounted for 67 per cent of Unibet revenues. It is an expanding market and Unibet’s wide-ranging offer is helping to drive that growth.
Casino Poker
Bingo
PRODUCTS PRODUCTS
NON-SPORTS BETTING
Soft games
The 18 games in Unibet’s lighter range include Hi-Lo, Keno, various forms of lottery and virtual sports games such as horse racing.
Though stakes tend to be smaller than for traditional casino games, the frequency of play is higher. This appeals especially to customers who want a spur-of-the-moment fl utter. Experience in 2007 demonstrates that this is a growing market, up 60 per cent from the previous year.
France, Sweden, the Netherlands and Belgium provide the biggest markets.
Scratch Card
Unibet launched a range of Skill Games in May 2007, allowing players to test their prowess against other players in arcade, sports or card games. Unibet currently has 14 single-player games. The latest additions include Yatzy and Scarab Solitaire. Multiplayer games include backgammon, couronne and 8-ball.
Easy, instant and widely appealing, scratch cards became part of Unibet’s universal offer in 2006.
Since then, scratch cards have evolved as a way to differentiate the Company from state monopolies, which offer less favourable odds.
By giving players a substantially higher chance to win, Unibet’s online scratch cards are helping to establish the Company as an attractive alternative to more traditional gambling channels.
Since its launch in Sweden in 2006, when it attracted more than 16,500 customers in four months, Unibet bingo has expanded to Denmark and Norway. In 2008, technological improvements will allow Unibet to offer bingo in all of its markets.
With the highest proportion of women players – some 20 per cent – of any online game, bingo provides huge potential for Unibet. As the game’s liquidity increases, so will Unibet’s offer – including an expansion of the games available from 75 balls to 90 balls.
Skill Games
On 21 December 2007 Unibet’s bingo position became even stronger with the acquisition of Maria Holdings, one of Scandinavia’s largest bingo operators. The acquisition price was SEK 705 million (GBP 54 million), payable as cash up front. Mariabingo has built its brand towards a female audience to become a market leader in the fast-growing area of multiplayer bingo.
Unibet and Maria see women as the largest untapped market segment for the gambling industry; Mariabingo and Mariacasino have a clear focus on this target group.
Today, approximately 60 per cent of Mariabingo customers are women. In 2008 Mariabingo will be rolled out to a number of markets outside of Scandinavia. Mariabingo has developed expertise in working with a female audience and developing suitable tonality in their games.
New entrants, lacking this experience, will struggle to make a signifi cant impact on the market. Unibet and Maria believes that the potential for these games in Europe is as great as it is in Scandinavia.
MARKET OVERVIEW MARKET OVERVIEW
BIG AND GETTING BIGGER
Deregulation and technological innovation will increase the size of the online betting market in Europe. Currently estimated to a gross win of EUR 4.3 billion, by 2012, that fi gure is expected to rise to EUR 7.9 billion.
Because of the globalisation of the industry and growing Internet penetration, companies that have specialised in online gambling and offering fi rst-class gambling experiences (i.e.
secure, innovative and reliable, with a wide range of products and competitive odds), are in an excellent position to expand.
• Thanks to their scalability, online operators are able to rapidly and effectively expand into new markets
• Sports betting has been the strongest driving force behind the market and now accounts for approximately a third of the global gambling market. Other products, such as casino and above all poker, have expanded rapidly.
Industry pundits believe that these types of games of skill are set to grow both in terms of the number of games and the number of players, as Internet usage increases.
Market drivers
The ability to provide digital service across national boundaries is opening up markets which were previously protected by state-regulated monopolies or dominant national gambling operators. New channels for offering games are attracting new customer groups and creating more gambling opportunities for existing customers.
The growth in televised sports events, as well as general interest in games is increasing the demand for online gambling. Media coverage of poker tournaments and the considerable media interest and coverage of poker help to increase the entertainment value. A wider range of games is drawing in new target groups and attracting more players and more bets per player.
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UNIBET’S MARKETS UNIBET’S MARKETS
Unibet was ranked no 6 in eGaming Review’s ranking of the Power 50 2007.
Each of the Company’s prime operating countries falls into the category of mature, established or new markets. In each, Unibet is implementing appropriate strategies to make the most of opportunities within the context of local conditions.
For those countries with markets that fall into the mature category, concentration is on launching more complex and challenging betting opportunities that build on user experience and sophistication. Live betting, a mobile platform and more games such as bingo are the key to continuing growth. Unibet is also offering fun bets on extraordinary themes such as Let’s Dance and the Eurovision Song Contest.
Special events and public relations campaigns are additional ways to refresh a presence in mature markets, as are more sophisticated customer-relations tools.
In established markets, where the objective is to encourage existing and potential customers to fi nd out more about Unibet, the Company embarks on carefully-targeted advertising and public relations campaigns that include sponsorships and affi liate programmes.
The fi rst objective in new markets is to introduce the Company and familiarise customers with the Unibet brand and what it represents: an entertaining, innovative, user-friendly, secure, trustworthy and reliable way to spend some leisure time.
Marketing activities
Opportunities to market the Unibet brand and products vary from one market to another. The interpretation of the law changes over time and differs from one country to another.
Unibet acts swiftly to exploit any new opportunities to acquire customers. The Company also seeks to create new opportunities. One example of this is Unibet’s initiative for poker TV formats in Sweden and Finland. This goes hand in hand with the creation of new poker sites providing news and tips on how to play.
Unibet measures the effectiveness of campaigns on a regular basis and conducts brand surveys in several countries. Other monitoring activities include competitor analyses and surveys of customer attitudes towards the gaming market and Unibet.
Unibet divides the market into three phases: mature markets, established markets and new markets. Different markets require different types of marketing. Each stage and market is unique, and marketing activities are therefore adapted to local conditions.
Unibet has developed a marketing strategy which underpins the
various stages that a market passes through.
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Strategies for customer loyalty
The fi rst fi ve months are crucial in determining whether a new customer becomes a loyal gambler.
Attractive odds, interesting and out-of-the- ordinary betting opportunities, a one-stop shop, new types of gambling, a user-friendly website, security and customer service are the key factors for ensuring customer loyalty. In addition, Unibet has an activity programme that is aimed at building a good customer relationship.
Licences
The gambling industry is strictly regulated with a rigorous control over the operators.
Unibet’s business is conducted under a class 1
‘Remote Gaming Licence’ in Malta, a ‘Combined Remote Operating License’ in the United Kingdom, an ‘Interactive Gaming License’ and an ‘Interactive Wagering License’ in Antigua and a ‘Convenzione di concessione per l’esercizio dei giochi pubblici sportivi’ in Italy.
ANNUAL REPORT 2007
Though the Company has customers in more than 100 countries, historically Unibet’s operations have been specifi cally targeted at Sweden, Denmark, Norway and Finland.
With the acquisition of MrBookmaker in 2005, the Netherlands, Belgium and France became equally important. Since then expansion has encompassed new countries in Southern and Eastern Europe – each with its own dedicated website.
UNIBET GOING FORWARD UNIBET GOING FORWARD
TO BE AMONG THE TOP THREE
By 2010 Unibet aims to be among the top three online gaming providers in all of its prioritised markets.
Unibet already leads its peers in the Nordic and Benelux countries and in France. The Company’s well-balanced geographic portfolio also extends to strong positions in Southern and Eastern Europe.
By 2010 Unibet aims to be among the top three online gaming providers in all of its prioritised markets. That vision is ambitious. It is also achievable.
The Company’s product breadth, commitment to marketing innovation and signifi cant investment in enabling technology will help make it happen.
A market leader
Unibet’s product is what the Company calls‘Moneytainment’ – a concept at the heart of Unibet’s achievements and strategy for growth.
Moneytainment means entertainment enhanced by betting – with the prospect of immediate and tangible reward. By constantly expanding and refreshing its Moneytainment offer, Unibet retains existing customers and attracts new players throughout growing markets.
In 2007 Unibet substantially completed work on a compelling new site – the fi rst major overhaul of the Company’s online presence since 2001.
Designed to be simpler to use, it features an innovative navigational concept based on one- stop-shopping. It is also more effi cient; providing increased transaction frequency, enhanced cross-selling potential and improved robustness.
Just as important, Unibet’s new online presence strengthens the Company’s dialogue with customers. It’s a two-way communication channel, fully in tune with player sensibilities.
So were Unibet’s 2007 marketing innovations.
These included new television formats for poker and sponsorship of Liverpool Football Club. All of these moves will bolster the Unibet brand and its online products as never before.
A brand to bet on
Gambling is both a pastime and an act of faith.
While it takes the player into the world of risk and doubt, there should be no doubt about the integrity of whoever is at the other end of the table or down the line. That is why Unibet’s brand is so important and why everything Unibet does is consistent with the six qualities that determine the corporate identity.
For one, Unibet provides entertainment, delivering on the promise of giving customers a good time, whether they win or lose.
Unibet is innovative. Customers delight in the new and different, just as the Company delights in giving it to them.
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Unibet continuously conducts local campaigns in different countries. Examples from Sweden and Finland include the ‘Sha-la-la’ campaign where customers could order CD’s or download ring signals. In Italy Unibet was the main sponsor of the poker tournament ‘La Notte del Poker’ with a prize pot of EUR 150,000. The Finnish poker TV format ‘Pokeritähti’ was a great success. The Unibet Mobile wap solution has been upgraded during 2007. During 2008 live score and live betting will be launched.
Successful integration of Maria Holdings Organic focus on existing markets
Leverage on new site, organisation and more targeted marketing to improve profi t margin
Distribution: sole focus on digital
Investigate future acquisitions post successful integration.
Going forward the Unibet way
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Unibet expansion
Unibet is user-friendly. No matter what the time of day or night, no matter what language they speak, players should feel they can just drop in at any time and start to play without fuss or complication.
Unibet is secure. All communications and payment transactions are protected against fraud in line with best practice used by the major credit card companies.
Unibet is trustworthy. The Company fully respects customers’ privacy and never divulges personal information to outside parties.
The Company also respects the law and provides safeguards to prevent under-age gambling.
Unibet is reliable. Secure payment procedures, sound betting techniques and dependable odds make the Company a gaming partner of choice.
Shareholders ownership data
On 29 February 2008, Unibet Group had 3,283 holders of SDRs.
On 29 February 2008, the Group’s eight largest owners represented 50 per cent of the capital and votes, as shown below.
Dialogue with capital markets
Unibet’s Investor Relations policy focuses on conducting a dialogue with representatives from the capital markets, aimed at increasing interest in Unibet’s shares/SDRs among existing and potential investors by providing relevant, up-to-date and timely information.
Investors and capital market players should be provided with clear information about the company’s activities with the aim of increasing shareholder value. Unibet strives to ensure good
SHARES AND SHARE CAPITAL SHARES AND SHARE CAPITAL
The Company’s issued share capital comprises 28,241,092 ordinary shares each with a par value of GBP 0.005. All ordinary shares carry equal voting rights and rights to share in the assets and profi ts of the Group.
Listing of Swedish Depositary Receipts Unibet Group plc’s Swedish Depositary Receipts (SDRs) were listed on the O-list of the Stockholm Stock Exchange (Stockholmsbörsen) on 8 June 2004. Since 1 January 2005, the SDRs have been included in the Attract 40 segment of the O-list. From 2 October 2006, the SDRs have been listed on the MidCap part of the Nordic List at the OMX Nordic Exchange in Stockholm.
The trading symbol is UNIB SDB. A trading unit is 50 SDRs and the ISIN code is SE0001 835588.
Unibet has a liquidity guarantee agreement with HQ Bank AB.
Share price performance
Unibet’s SDRs ended the year at SEK 223, having started the year at SEK 190. The lowest price during the year was SEK 164.50 and the highest was SEK 273.00.
As at 31 December 2007, Unibet Group plc had a market capitalisation of approximately SEK 6.3 billion.
Trading volumes
In 2007, 35,884 trades in Unibet Group were done, representing a total value of over SEK 6,461 million.
Dividend policy
The Board of Directors announced new fi nancial objectives in the Q1 2007 report, including an improved dividend policy to pay a dividend of up to 75 per cent (formerly 50 per cent) of the Group’s net income after tax to the shareholders, provided other fi nancial objectives are met and an appropriate capital structure is maintained.
In addition, all banking and debt covenants will need to be adhered to. All SDRs entitle the holder to the same dividend rights as holders of ordinary shares.
Proposed dividend
The Board of Directors proposes a dividend of GBP 0.50 (0.41) per share/SDR approximately SEK 6.30 (5.50) with the exchange rate 12.579 GBP/SEK at 15 February 2008, per ordinary share to be paid to holders of ordinary shares and SDRs. If decided by the AGM, the dividend is expected to be distributed on 8 May 2008 and amounts approximately to 75 per cent of net profi t after tax.
No dividend will be paid on the shares/SDRs held by the Company as a result of the share buy-back programme.
As part of the conditions for the Bond issue, Unibet has undertaken not to distribute more than 75 per cent of the Group’s net result through dividend or share buy-back, and to ensure that net debt does
not exceed three times the Group’s EBITDA in respect of the most recent 12-month period.
Share buy-back programme
At the 2007 AGM, shareholders approved a share buy-back programme whereby the Board was authorised, until the next AGM 2008, to acquire GBP 0.005 ordinary shares/SDRs in the Company. The maximum number of shares/SDRs that may be so acquired is 2,824,109, i.e. may not exceed 10 per cent of the total number of shares issued by the Company. Under this approval, 297,900 shares/SDRs have been acquired by the Company. The number of outstanding shares at 31 December, 2007 was 27,943,192.
The intention of the Board is to either cancel the shares (requires further shareholder approval), use as consideration for an acquisition or issue to employees under a Share Option programme.
Share of
Number of share capital/
Shareholder shares/SDRs votes % Accumulated %
Anders Ström through company 3,403,356 12.1% 12.1%
Capital Group 2,104,070 7.5% 19.6%
Nordea Fonder 1,716,822 6.1% 25.7%
Peter Lindell directly and through company 1,672,214 5.9% 31.6%
Staffan Persson directly and through company 1,678,750 5.9% 37.5%
Fidelity 1,238,975 4.4% 41.9%
Zenit 1,168,300 4.1% 46.0%
Ram One 1,140,000 4.0% 50.0%
Unibet Group plc 297,900 1.1% 51.1%
Others 13,820,705 48.9% 100.0%
Total 28,241,092 100%
Source: VPC AB.
Number of Number of Share capital/
Holding shareholders shares/SDRs votes %
1-500 2,604 357,678 1.3
501-1,000 282 231,668 0.8
1,001-10,000 240 797,855 2.8
10,001- 250,000 130 6,910,490 24.5
250,001- 27 19,943,401 70.6
Total 3,283 28,241,092 100.0
Source: VPC AB.
Analysis of shareholdings at 29 February 2008
Ownership distribution at 29 February 2008
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Unibet share price development
access to such information for capital markets, notably through presentations in Stockholm and London and through road shows in other European countries as well as the USA.
On Unibet’s corporate website,
www.unibetgroupplc.com, investors can fi nd up-to-date information about the Group’s fi nancial performance, stock market data, a fi nancial calendar, Company information and other important data.
Unibet arranges the following capital market activities:
Par value Increase in
Issue Change in number Total number per share share capital Share capital
Transaction Year price ordinary shares ordinary shares GBP GBP GBP
Incorporation 2000 – 2 2 0.01 0.02 0.02
Share exchange 2000 – 10,204,200 10,204,202 0.01 102,042 102,042.02
Private placement 2001 2.45 268,994 10,473,196 0.01 2,689.94 104,731.96
Rights issue 2002 1.55 645,000 11,118,196 0.01 6,450 111,181.96
1:2 reverse split 2004 – -5,559,098 5,559,098 0.02 – 111,181.96
New issue 2004 10.49 703,700 6,262,798 0.02 14,074 125,255.96
Exercise of options 2004 5.48 5,000 6,267,798 0.02 100 125,355.96
Exercise of options 2004 7.06 2,500 6,270,298 0.02 50 125,405.96
Exercise of options 2005 4.02 159,975 6,430,273 0.02 3,199.50 128,605.46
Exercise of options 2005 5.48 1,000 6,431,273 0.02 20 128,625.46
Split 4:1 2005 – 19,293,819 25,725,092 0.005 – 128,625.46
New issue 2005 – 2,400,000 28,125,092 0.005 12,000 140,625.46
Exercise of options 2006 1.01 116,000 28,241,092 0.005 580 141,205.46
The table below shows the development of the new holding company’s share capital since its incorporation in 2006:
Par value Increase in
Issue Change in number Total number per share share capital Share capital
Transaction Year price ordinary shares ordinary shares GBP GBP GBP
Incorporation 2006 Lm 1 500 500 Lm 1 Lm 500.00 Lm 500.00
Subdivision and conversion 2006 – 159,500 160,000 0.005 – 800.00
Increase to minimum for plc 2006 – 6,240,000 6,400,000 0.005 31,200.00 32,000.00 Issued in group reorganisation 2006 – 21,841,092 28,241,092 0.005 109,205.46 141,205.46 Five year summary
2007 2006 2005 2004 2003
Equity per share GBP 3.384 3.290 2.155 0.754 0.217
Equity per share after full dilution GBP 3.376 3.248 2.135 0.732 0.207
Earnings per share GBP 0.665 1.344 0.523 0.370 0.130
Earnings per share after full dilution GBP 0.659 1.342 0.515 0.359 0.123
Cash flow per share GBP 0.59 0.50 -0.07 0.83 0.17
Dividend per share SEK 6.301 5.50 2.25 2.25 –
Return on total average equity % 10.9 31.0 18.9 41.6 44.8
Equity:assets ratio % 45.1 70.8 53.6 58.9 46.6
Number of shares at year end 28,241,092 28,241,092 28,125,092 25,081,192 22,236,392 Fully diluted number of shares at year end 28,308,080 28,612,088 28,394,747 25,841,092 23,333,969
Average number of shares 28,096,472 28,197,870 26,223,857 23,890,576 22,236,392
Average number of fully diluted shares 28,355,999 28,236,388 26,640,068 24,676,613 23,333,969
1 The Board of Directors proposes a dividend of GBP 0.50 which is approximately SEK 6.30 per share/SDR.
The above fi gures have been re-stated to refl ect the changes in nominal value of the share.
Ownership structure
%
Swedish fi nancial institutions 30.0 Other Swedish fi nancial entities 3.9 Other Swedish legal entities 2.5
Non-Swedish owners 59.7
Swedish natural persons 3.9 Total 100.0 Source: VPC as at 29 February 2008.
• Quarterly meetings and teleconferences for analysts, investors and fi nancial media
• Financial hearings in Stockholm
• Participation in industry seminars and conferences
• Webcasts are available after each quarterly presentation.
Share capital development
There were no changes in share capital in 2007.
The development of the Company’s share capital is shown in the following tables, the fi rst of which is presented to provide continuity of information for shareholders and summarises the development of the share capital of UGP Limited (formerly Unibet Group plc), which was the parent company
of the Unibet Group until the Group reorganisation carried out on 1 November 2006:
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In order to attract and retain these passionate and friendly experts, Unibet strives to create an atmosphere which is challenging, enjoyable and rewarding. In order to secure such an environment, Unibet has focused on hiring WILL, developing SKILL, rewarding PERFORMANCE and supporting GROWTH.
Hiring WILL – Unibet is always looking to employ outstanding achievers with a will to deliver and an ability to grow with the Company. To that end, in 2007, Unibet put in place specifi c recruitment requirements for every position at every level in the Company. These criteria include academic degree, fl uency in at least two languages, international experience and – as an extra dimension – an interesting talent or passion.
In order to attract these stars, Unibet is making an effort to position the Company as an employer of choice by becoming recognised for its positive
working environment, diverse workforce, equal opportunities and great growth opportunities.
As part of that effort, the Company repeated an employee survey fi rst undertaken in 2006 and concentrated Human Resources activities in 2007 on commercial imperatives and acted on employee suggestions.
Developing SKILL – In 2007, Unibet made several advances in the Company’s training programme. These included Unibet Academy courses for employees throughout the Company as well as further instalments of the ‘Good to Great’ leadership programme that had its start in 2006. Aimed at middle managers and others with recognised potential, the Good to Great syllabus features modules on building and managing teams, change leadership, strategic development and effective communications.
By the end of 2007, 54 Unibet people had received the programme’s benefi ts.
DEDICATED PEOPLE DEDICATED PEOPLE
BY PLAYERS, FOR PLAYERS
Unibet operates in an area where each new step involves breaking new ground and Unibet’s promise to the market is expertise, passion and friendliness. The key is Unibet’s employees, who genuinely care about and enjoy what they do. No matter what their backgrounds, or which of 34 countries they come from, Unibet people are uniquely qualifi ed to understand their customers and contribute directly to the Company’s continuing success.
Employee structure 2007
Supporting GROWTH – During 2007, Unibet launched a special programme dedicated to Performance and Growth Enrichment.
Popularly known as PAGE, this system enables the Company to identify high-growth potential, target development efforts and develop succession planning that crosses geographical and departmental boundaries. On top of this, during 2007, Unibet performed 360-degree evaluations that helped identify and realise the potential of today’s leaders – and tomorrow’s.
Rewarding PERFORMANCE – Through PAGE, Unibet has improved managers’ ability to identify and reward outstanding performance. Equally important is the way which PAGE enables the Company to fi nd out what best motivates each individual in line for reward and encouragement.
PAGE also ensures the implementation of equal opportunities and provides fair and consistent procedures to deal quickly with any issues of under-performance.
Interaction, a common vision and a shared knowledge platform are the keys to a successful organisation with shared values. A company with offi ces in several countries and employees in different parts of Europe needs a well functioning structure to always attract the best people for future growth.
The road to excellence
An active role
Unibet has long taken an active role in ensuring all of this for all its customers.
For example, the Company is a leading participant in international projects aimed at regulating and actively assisting that small percentage of gamblers who develop problems with the size or frequency of their betting.
To help identify such customers, Unibet continuously monitors customer activity.
For players who feel they might be developing gambling problems, there are several options.
A self-test allows players to reach an objective assessment of their betting behaviour. If they feel uncomfortable with the results, they can set limits on the amount and frequency of their betting. Or, if they prefer, they can have themselves barred from the Unibet site for a set period of time or indefi nitely.
To date, about 2 per cent of Unibet’s 2.3 million customers have set their limits while 1 per cent has opted for self-exclusion. Electronic safeguards ensure that these wishes are respected.
Unibet’s qualifi ed responsible gaming adviser oversees Unibet’s responsible gaming programmes. This includes training courses for employees, relevant IT systems, website and links with research, counselling organisations, personal contact with relevant customers, networking with other signifi cant actors in the fi eld and constantly building strategies for Unibet as to how we can improve and develop in this area.
The battle against underage gambling is also a part of this role. To counteract the risk of children on-site, Unibet service staff monitor new customer accounts to verify that the account holder is of legal age to play. To bolster this safeguard, the Company is also installing third party ID controls operated by an international service to complement existing national providers wherever possible.
A wider concern for anyone who uses the Internet is data security. Again, Unibet is in the vanguard of customer protection. The Company’s determined security and fraud department constantly monitors betting activity from various angles. As a result, customers benefi t from the highest degree of operational integrity. The Company also has established links with third- party fi nancial institutions and security bodies.
On a European level, Unibet is working tirelessly to demonstrate how private operators can integrate social responsibility into the online betting business. In October 2007, for example, the company began an auditing programme to be verifi ed by the independent body eCOGRA.
As a member of the Remote Gambling Association (RGA), Unibet subscribes to the RGA codes on social responsibility as well as the RGA global responsible gambling code.
Unibet also helped to establish the European Gaming and Betting Association (EGBA).
Through this organisation, the Company helps to promulgate best practice in responsible betting. EGBA’s statute specifi es how member companies – including eight of Europe’s leading gaming companies – should deal with issues such as gambling addiction, illegal play by minors, customer privacy and money laundering. EGBA represents its members towards the legislative and administrative bodies of the EU and thereby plays a role in establishing the wider framework of the industry.
Unibet’s membership in the European Sports Security Association (ESSA) demonstrates the Company’s commitment to a clean sports- betting environment; one that is free of insider betting or bet rigging and manipulation.
The purpose of ESSA is to be a self regulatory organisation with its own code of practice, which all members will adhere to and provides for an early warning system highlighting ‘Irregular Betting Patterns’. The ultimate aim of ESSA is i) to prevent any manipulation scandals and ii) to contribute to sports being clean and free of corruption.
In the event ESSA, and its members, identify any irregular betting patterns or insider betting, ESSA will immediately pass the information on to the competent sports regulators. If it is then deemed necessary to take legal action against any one or group of persons within your sport ESSA would then co-operate with the authorities to assist further investigations within that sports authority.
Unibet further believes that a highly regulated and competitive online sports betting market contributes to clean and fair sport. First of all, competition has a controlling and regulating effect. Second, as all betting transactions are registered in real time by identifi able persons, irregular behaviour can be identifi ed, allowing appropriate action.
The Company also has a positive impact on the wider environment. Online betting, by its very nature, makes the glamour of the gaming table, the challenge of skill games, the fun of bingo, the intensity of poker and the excitement of major sports events available to everyone qualifi ed to play – anytime and anywhere with no need for energy use on transport or its associated emissions or the waste generated by betting slips and other paperwork. Virtual gaming is therefore virtually emissions free.
But that doesn’t give Unibet grounds for complacency. Far from it. So the company is actively reducing its own carbon footprint wherever possible. For instance, to keep pace with fast growth and stay nimble, effi cient management processes between offi ces in London, Sweden and Malta make maximum use of video conferencing facilities. These energy- saving links yield lower operating costs, enhanced productivity, greater time effi ciencies and improved business agility.
